In the ever-evolving landscape of global trade, staying informed
about free trade agreements is essential for businesses looking to
expand their international operations and seize new opportunities. One
such significant agreement that has reshaped North American trade
dynamics is the
United States-Mexico-Canada Agreement (USMCA). For business
professionals engaged in trade activities with Canada and Mexico,
understanding the rules and provisions related to the USMCA is
paramount. In this blog, we'll delve into four key provisions included
in the 2020 update to the USMCA and the implications for North
Modernizing Trade for the Digital Age
The USMCA, often dubbed NAFTA 2.0, was designed to adapt to the
digital economy that has evolved since the
original agreement took effect in 1994. The accord places a
strong emphasis on digital trade, data protection, and e-commerce,
creating a favorable environment for companies operating in these
domains. Business professionals can capitalize on the increased
digital trade provisions to expand their online presence, engage in
cross-border e-commerce, and tap into a wider consumer base.
Navigating Rules of Origin and Market Access
Understanding the intricate
rules of origin within the USMCA is vital for organizations
seeking to maximize the benefits of the agreement. The new rules lay
out specific criteria pertaining to Tariff Shift and Regional Value
Content (RVC) rules, that products must meet to qualify for
preferential tariff treatment. Preferential tariff treatment provides
improved market access, allowing U.S. businesses to continue trade
with Mexico and Canada with reduced tariffs and barriers. Meeting the
standards of the USMCA allows businesses to maximize the benefits and
succeed in their North American trade initiatives.
New Automotive Rules to Fostering Regional Growth and Fair Trade
The USMCA also
brought about substantial changes in automotive rules within the
region. One key alteration was the increase in the regional value
content (RVC) requirements, mandating a higher percentage of vehicle
components to be sourced from the region while eliminating loopholes
used to undermine RVC thresholds. This shift aimed to incentivize the
use of North American materials and labor, promoting economic growth
and job creation within the member countries. Additionally, the USMCA
implemented rules promoting higher wages for auto workers, seeking to
level the playing field and discourage outsourcing of production to
lower-wage countries. These changes signify a reformed approach to
automotive trade, emphasizing regional cooperation and fairness in the industry.
Strengthened Labor and Environmental Standards
Unlike its predecessor, the USMCA
places more robust labor and environmental
standards at the forefront of the agreement. This shift resonates
with the growing global focus on sustainable and responsible business
practices. For organizations participating in global trade, this means
aligning business operations with these elevated standards to ensure
compliance and create a more equitable work environment for all.
Moreover, these standards can present opportunities for collaboration
and innovation in sustainable technologies and practices.
Learn More about the USMCA
In conclusion, the USMCA has significantly modernized the North
American trade landscape, offering both challenges and opportunities
for businesses engaged in North American commerce. For organizations
involved in trade with Canada and Mexico, it's crucial to know the
rules of USMCA to make informed decisions that align with your
company's growth objectives.
To delve even deeper into the nuances of the USMCA and maximize the
benefits of trade with Canada and Mexico, we encourage you to attend
our upcoming training session: The
Basics of USMCA
. Industry experts, Jean-Marc Clement, Principal
at Clement Trade Law, and Mark Bleckley, Associate
Director at GVSU’s Van Andel Global Trade Center will provide
comprehensive insights into the applicable rules, equipping you and
your business with the knowledge needed to leverage its advantages
effectively. Generously sponsored by Clement
Trade Law and Supply
Chain Solutions you don't want to miss this opportunity to
enhance your expertise and expand your knowledge of the USMCA!
Learn more about the upcoming Basics of USMCA
October 16, 2023
In a recent announcement on September 6, 2023, the Office of U.S.
Trade Representative Katherine Tai revealed that the expiration date for the Section 301 tariff
exclusions has been extended. Originally set to expire on
September 30, 2023, these exclusions will now remain in effect until
December 31, 2023, as reported by Reuters. This decision impacts a wide range of
Chinese imports. Here, we break down the key details you should be
aware of regarding these tariff exclusions.
Impact on Imports
The continuation of these tariff exclusions impacts a total of 352
Chinese imports and 77 categories related to COVID-19 are affected.
The categories encompass an extensive range of products, including
industrial components like pumps and electric motors, automotive
parts, chemicals, vacuum cleaners, and critical medical supplies such
as face masks, gloves, and sanitizing wipes.
Understanding Section 301
To comprehend the context of these tariff exclusions, it's essential
to understand the legal framework behind them. These exclusions are
rooted in Section 301 of the Trade Act of 1974. This legislative
provision empowers the President of the United States to impose
tariffs on imports from countries engaging in unfair trade practices.
The Office of the United States Trade Representative (USTR) is tasked
with the authority to conduct investigations and take necessary
actions to protect U.S. rights under various trade agreements, as
outlined by the Congressional
Origins of the
China 301 Tariffs
The origins of these tariffs can be traced back to actions taken in
2018 and 2019 when former U.S. President Donald Trump imposed tariffs
on a wide array of imports from China, totaling around $370 billion.
These tariffs were implemented following a comprehensive Section 301
investigation. The investigation revealed that China was involved in
the misappropriation of U.S. intellectual property and was pressuring
U.S. companies into transferring sensitive technology.
These findings prompted the U.S. government to take action to address
trade imbalances and unfair trade practices with China. (Source: White & Case)
In conclusion, the extension of the Section 301 tariff exclusions
underscores the ongoing efforts of the United States to rectify trade
imbalances and address unfair practices, particularly with China. Stay
tuned for updates as the situation evolves.
September 7, 2023
Country of origin is one of the more confusing concepts to master in
conducting international trade or even applying to U.S. domestic
business activities. There are three crucial pieces of data that must
be managed for compliance purposes in international trade - customs
value, Harmonized System (HS) classification, and country of origin.
Customs value which determines the amount of duty and taxes to be paid
on imported goods is based on a global standard known as the
"Valuation Agreement", a treaty administered by the World
Trade Organization. HS classification is a standardized system
for the classification of goods adopted by almost every country in the
world. Country of origin, conversely, is subject to no global
standard. There are many authorities and governing bodies (called
jurisdictions) that are crafting specific rules of origin which meet
the specific objectives and purposes of that jurisdiction.
Before making country of origin too complicated or confusing, there
is a universally accepted basic concept of country of origin which
should be the default definition until some entity decides to redefine
it. In international trade, "country of origin" refers to
the country where a product was grown, produced, or manufactured. For
raw materials and commodities, this means it wholly originated in a
country. For manufactured goods, the country of origin is typically
determined by the place where the product underwent its last
substantial transformation, meaning the point at which it was
transformed into a new and distinct article from the raw material or
components used in the production of the goods. This general
definition of country of origin should be the default definition in
international trade, both import and export, until some authority
Here are the most common jurisdictions (primarily in the United
States) of country-of-origin definition to be aware of. These
authorities have established specific definitions of "country of
origin" for various purposes:
Importing into the United States:
U.S. Customs and Border Protection
(CBP) is responsible for enforcing trade regulations at U.S.
ports of entry. The CBP uses a specific set of rules to determine
the country of origin for imported goods, known as the "Marking
of Country of Origin of Imported Merchandise" regulations,
utilized for declaration requirements on all U.S. customs entries
and the country of origin marking of goods. These regulations define
the country of origin as the product’s country of last substantial
transformation, following the basic default definition for country
Exporting from the United States: When U.S.
exporters are completing export documents and export declarations
for international shipments, they should still declare the country
of origin, as required on the export commercial invoice and export
declaration, utilizing the same basic default definition of country
of origin – the country it was manufactured in or substantially
transformed in – until another jurisdiction of country of origin
supersedes that definition. Technically, every country of
destination is a different jurisdiction that can define country of
origin for their purposes. Still, U.S. exporters should stick to the
general definition unless instructed otherwise by their foreign customers.
United States-Mexico-Canada Agreement (USMCA):
USMCA is a free trade agreement between the United States, Mexico,
and Canada. The USMCA includes specific rules of origin that
determine whether a product qualifies for preferential tariff
treatment under the agreement. The specific rules of origin written
into the agreement require the use of tariff shift and regional
value content as the defining rules determining qualification as an
originating good from the parties to the agreement.
All other U.S., and most other international free trade agreements:
FTA agreement will have specific rules of origin written in
the same manner as the USMCA agreement.
Federal Trade Commission (FTC):
FTC issues its own set of country-of-origin rules for the use of
“Made in the USA" in the United States. U.S. manufacturers are
not required to mark or identify U.S.-made products on product
labels are in advertising material, but if they do, it must meet a
strict set of FTC rules. If a U.S. business makes a claim of “Made
in the U.S.” the FTC considers the statement to be an unqualified
claim or origin and sets the standard that it must be “all or
substantially all” made in the U.S. – loosely quantified as 80% or
more. If not, then a qualified claim is required. Qualified claims
must include phrases like "Made in the USA with imported
parts" or “Assembled in the U.S. with U.S. and foreign
components”. The FTC's objective is to ensure that consumers are not
misled about the domestic and foreign content of the products they purchase.
U.S. Department of Agriculture (USDA): The USDA has
specific regulations regarding the labeling of agricultural
products, including country of
origin labeling (COOL) requirements. Under these regulations,
certain food products must be labeled with their country of origin,
including beef, pork, lamb, chicken, and goat meat, as well as
perishable agricultural commodities such as fruits and vegetables.
Buy American Act:
The Buy American
Act is a federal law that requires that certain federal
government purchases of goods and materials be made from domestic
sources unless an exception applies. Under the Buy American Act, a
product is considered to be of domestic origin if it is manufactured
in the United States, and at least 50% of the cost of the components
of the product is attributable to materials mined, produced, or
manufactured in the United States.
Michigan State Trade Expansion Program (STEP):
Michigan STEP program is a state-run program that provides
grants to small businesses in Michigan to help them expand their
exports. The program includes specific rules regarding the country
of origin of the exported products. To be eligible for the program,
a product must be manufactured in Michigan and at least 51% of the
value of the product must be attributable to materials and labor
costs in Michigan.
Mastering the intricate concept of country of origin in international
trade, as well as its application to U.S. domestic business
activities, can be a perplexing endeavor. The definition of country of
origin lacks a universal consensus, allowing jurisdictions to mold it
to their specific objectives. However, before succumbing to
overwhelming complexity, it is crucial to recognize the universally
accepted basic concept of country of origin—a default definition that
refers to the country where a product was grown, produced, or
manufactured. This general definition should serve as a starting point
in international trade until an authoritative entity redefines it. By
familiarizing ourselves with the various jurisdictions and governing
bodies involved, such as U.S. Customs and Border Protection, the
United States-Mexico-Canada Agreement (USMCA), and the Federal Trade
Commission, we can navigate the labyrinthine landscape of country of
origin with confidence and compliance. Whether importing or exporting,
it is vital to adhere to the prevailing definitions while remaining
open to the ever-evolving dynamics of international trade.
Are you interested in learning more about Country of Origin?
Since 1999, GVSU's Van Andel Global Trade Center (VAGTC) has
been helping Michigan businesses succeed globally through import and
export training and consulting. Whether you are thinking about opening
a new market, figuring out customs compliance and international
regulations, or looking for overseas suppliers to complement your
global supply chain, Van Andel
Global Trade Center can help.
Contact us today!
About the Contributor:
Mark Bleckley is the Associate Director at GVSU’s Van Andel Global
Trade Center. He is a licensed customs broker and has been involved in
global trade for over 30 years. He has managed all aspects of import
and export operations, including transportation and logistics, customs
clearance, export documentation, recordkeeping, compliance and
management of Harmonized Tariff Schedule and country of origin
determination and management, as well as, analyzing free trade
agreements for maximum benefit.
June 20, 2023
It seems like all over the internet there are guides giving advice on
specific locations or countries. Some of their advice can range from
very specific to extremely broad, making it all the more confusing as
to what advice might carry over into a different country. But what
advice do all these guides have in common?
Here are some general rules to apply when expanding your business to
1. Understand the Market
Market research is absolutely vital when trying to reach a certain
segment. When expanding internationally, this step is crucial. Markets
vary widely by country and region, market research for a specific
area/region is highly recommended.
Some things to consider while putting together market research:
- Local currencies
- Potential client base in your market segment
- Number of local competitors currently in your target segment
- Foreign competitors in the desired market segment
If performing business from your home country and shipping to a
foreign country, ask yourself: Do they take my currency? Could I take
their local currency? What kind of people am I trying to sell my
product to? What type of people need my product? Which companies in
that market are already selling a product similar to what I am trying
to sell? Is that market oversaturated?
Asking and answering these types of questions can help verify that
your business can become successful in your next venture.
2. Know the Regional Politics
On the outside, a venture might seem extremely viable, but if the
political climate is not advantageous then everything can stop in its
tracks. If governmental entities are unwelcoming to foreigners or
certain types of businesses, then adjustments should be made accordingly.
Things to look out for regarding regional politics include:
- Recently passed legislation regarding the business sector your
company is attempting to enter
- Any tariffs or exceptional high duties
- Past and present tensions between the country of origin and the
country your business is attempting to expand to
Has the country you’re operating from been at odds with the country
you are trying to perform business with recently? Have the respective
governments responded by putting tariffs and other restrictions on
each other? Such actions would make trying to get your product within
that country extremely expensive and could potentially ruin the
competitive advantage you once held over your foreign competitors.
Additionally, if the country residents are highly involved in these
politics, they might boycott your product anyway. It is important to
consider this a highly relevant factor when attempting to expand internationally.
3. Study the Culture
The culture difference can be a make-or-break point when introducing
a new business within a foreign culture. Certain topics might be
considered more taboo, other countries may hold more conservative
values, and different countries might have almost no boundaries at all.
Here are some techniques to get an accurate grasp of a country’s culture:
Analyze Their Media - If a country’s media
broadcasts highly controversial or offensive content, business in
this country may not be good for business. Media analysis can also
often give you an idea of what’s popular with your demographic and
help you advertise abroad.
Look at Their Laws - Some countries might ban
certain demographics from certain activities by the letter of their
law. In that case, it would not be wise to release a product that
would make those demographics legally vulnerable or unsafe.
Know Their History - Countries historically go
through phases, yet many aspects of their culture remain constant
over time. It’s important to understand major historical movements
that have happened within your target country, how they affected or
changed the culture, and whether are not some of those impacts are
still lasting today. Additionally, it is vital to identify ongoing
movements and build that into your brand identity for marketing
within that country.
Also, understand that cultures within countries can also vary by
region as well, so the more specific an analysis is to the target area
the better. It is vital to know if your product or service would
transition well within a country’s culture to gauge how successful it
has the potential to be. For example, avoid selling products that go
against a religious belief held by the majority or confront a cultural
taboo in the country you are looking to do business in. It is vital to
identify whether your product has a “fit” within the culture you are
trying to sell to.
With all three of these major factors in mind, you are now ready to
successfully expand your business abroad and find yourself a market
with the perfect fit for your product or service and the Van Andel
Global Trade Center (VAGTC) can help! Whether you are a company just
starting to consider global expansion or have been at it for a few
years, VAGTC can help you go global or expand into new markets. With
funding opportunities available for small and medium-sized businesses
from the Michigan Economic Development Corporation (MEDC)
through the Michigan State Trade Expansion Program (STEP),
there is no better time than now to start or expand your export operations!
For more specialized information on expanding your business
internationally and getting connected to the MEDC and STEP, schedule a
consultation with the Van Andel
Global Trade Center to answer any questions and get connected.
ABOUT THE CONTRIBUTOR
is a Student Assistant at
GVSU’s Van Andel Global Trade Center
. She is a Senior currently pursuing an undergraduate degree
in Finance, Human Resource Management, and General Management at
Grand Valley State University. She enjoys lifting weights, getting
lost in a good video game, spending time with friends, and going on
Edited by Parker Mackey, a student assistant at
the Van Andel Global Trade Center.
May 18, 2023